Nickel has hit the skids. Having peaked at a three-year high of $29,425 a tonne in February, it has fallen below $22,000, making it the worst-performing base metal this year. Few analysts think nickel, a key ingredient in stainless steel, will challenge the February high, let alone its 2007 record peak above $50,000 “for several years”, says Jack Farchy in the FT.
That’s because, after five years of high prices, “new nickel production is finally beginning to come on stream in abundance”. Investment bank Macquarie reckons that output will rise by 10% this year and 11% next. Between 2008 and 2010, there was practically zero growth. The biggest production increase stems from China, where a 48% rise in low-grade nickel ‘pig iron’ will account for half of the overall nickel production increase this year, while long-delayed projects from major miners are now finally about to start producing. The volume of Chinese output is likely to offset any mine production delays, says Macquarie’s Jim Lennon, who thinks prices could breach $20,000. According to Capital Economics, the supply increase and the global slowdown will send nickel to $19,000 by the end of March 2012.